Financially oriented director: New role and new responsibility;

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THE FINANCIALLY ORIENTED DIRECTOR
New Role and New Responsibility
by RUSSELL E. PALMER/Managing Partner, Touche Ross & Co,
Is the rote of the financially oriented director different from that of other corporate directors? To a degree it is.
Most directors tend to see themselves as directors first, placing their primary occupations, skills, personal interests, and even their board committee memberships in a context of broad responsibility—a view that is both appropriate and necessary. A financially oriented director, like any other, needs this breadth of vision because, ultimately, his job is direr ling, not doing. A director with a financial background should not assume a broader respon-sibility for all financial problems, nor should he narrow his responsibility to exclude other matters.
Lawyers might argue that all directors bear the same responsibility, but whether they would advise all director-clients to assume the same role is open to question. What is certain is that the roles of these directors have changed. In his testi-mony before the Senate Judiciary Committee's subcommittee on citizens' and shareholders' rights and remedies in 1977, J. Wilson Newman, a retired chairman of the board of
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Dun & Bradstreet and a director of Lockheed Aircraft Corporation, raised an important point about the changing role of directors: "Added responsibilities are being placed on directors and being demanded now, in terms of legal concept They have been there all the time, but now they have surfaced"
Before Watergate, for example, how many directors would have bothered to ask about corporate codes of conduct, illegal political contributions, or bribery of foreign government officials? Or, until recently, how many directors would have asked about women or minori-ties in their organizations? Few, probably. Now, under the law, directors must concern themselves with such questions.
Adapting to Reality
A 1975 Conference Board report suggests another important area of change. The report, entitled "Corporate Directorship Practices; Role, Selection and Legal Status of the Board," cites the "increasing legal recognition of the complexities of modern business, and of the diver-gent backgrounds, experience, and
responsibilities among directors on the board." Moreover, the article argues, there is a trend toward "more flexibility, with the law adapting itself to the problems at hand." No longer do the same principles necessarily "govern the directors of all corpora-tions-whether a thousand or a billion dollar operation or whether a service or a manufacturing organiza-tion." Nor does every director bear "the same responsibility, whether he be an insider, an officer, an outsider, an attorney, an investment banker, an educator, an environmentalist, or whatever. Significantly, there are more and more instances of courts look-ing to the realities of the facts presented,"
Those "realities" are far from clear. But one thing is becoming more apparent—specialized knowledge does influence the role a director will play while serving on a board. An officer-director, for example, can gather more from the information the board receives about corporate activ-ities than a director who has not served as a member of corporate management. Similarly, the financially oriented director is expected to apply his experience and insight to the